Marvelous Manufacturing (MM) generated the following information for its capital budgeting manager: Capital Structure Project Cost IRR Type of Capital Proportion W $65,000 15% Debt 30% X 70,000 13 Common equity 70 Y 75,000 12 Z 70,000 11 MM's weighted average cost of capital (WACC) is 12 percent if the firm does not have to issue new common equity; if new common equity is needed, its WACC is 16 percent. If MM expects to generate $70,000 in retained earnings this year, which project(s) should be purchased? Assume that the projects are independent and indivisible
QUESTION 23
-
Marvelous Manufacturing (MM) generated the following information for its capital budgeting manager:
Capital Structure
Project Cost
IRR Type of Capital ProportionW $65,000 15% Debt 30%
X 70,000 13 Common equity 70
Y 75,000 12
Z 70,000 11
MM's weighted average cost of capital (WACC) is 12 percent if the firm does not have to issue new common equity; if new common equity is needed, its WACC is 16 percent. If MM expects to generate $70,000 in retained earnings this year, which project(s) should be purchased? Assume that the projects are independent and indivisible.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
